Aoyama Sogo Accounting Firm

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C h a i r m a n ' s

Vol.342024.6.28

C o l u m n

Non-financial Disclosures:
CO2 emissions calculation for ASA
Reskilling has been gaining attention. I was reading
the newspaper just the other day, and the term
“learning vacation,” like workcation caught my eye. Theidea is to focus on relearning by changing the learning
environment. As a practitioner myself, I recommend
taking certification exams or something similar that
leads to clear achievements. Since the core identity ofASA is an accounting firm, the bookkeeping tests makesense. Rather than vaguely studying for something, thelevel 1 or 2 bookkeeping certifications will enable staff
to explain topics better and motivate them further as
professionals.
Personally, I am interested in the field of environment,energy, and decarbonization management.
Feeling the impact of the ISSB (under the IFRSFoundation), the Financial Services Agency is
considering disclosures in annual reports for GHG
emissions across the firm’s entire supply chain. There isspeculation that Tokyo stock exchange Prime listedcompanies with market cap of 3 trillion yen or more will
be subject to this rule. The rule may possibly take effectin March of 2027 or 2028 (April 22, 2024, edition ofNikkei Business).
Since our firm is not a publicly listed company withmarket cap of 3 trillion yen or more, you may think wewon’t be affected. However, being part of the upstream
or downstream supply chain will likely subject us toprovide data for scope 3 GHG emissions calculations.
This will undoubtedly add a bit more burden on us.
In the ordinary course of our business, ourinternational clients seem to have a higher awarenessof topics like carbon neutrality and CO2 emissions
reduction. We often get requests to provide
information or get asked questions. In particular, we getasked about our firm’s CO2 emissions and related

services. In the U.S., if the new president becomes
Trump, some say that rules may change. However, thistrend seemingly won’t stop, and firms will likely beasked to explain their roadmap to carbon neutrality.
For ASA, we may need to calculate annual emissions.
As an accounting firm, we don’t produce any consumer
goods. Instead, scope 3 items like business trips andpaper disposal may have a big impact on calculation. For
example, the total emissions for a business trip to theKansai region may differ depending on whether travel isby bullet train, airplane, car, or boat. A process togather this information would be needed.
Typically, the bullet train produces less emissions thanairplanes. Since each of our departments book tickets
separately, the only difference from an administrative
perspective may be cost. If that’s the case, ourcompany-wide process may need a review.
In addition to current disclosure requirements,
disclosure of non-financial information is unavoidable.
My immediate goal is to learn more about theenvironment, energy, and decarbonization management,even if that means becoming a basic level ESG
professional.
by Kazuhiro Matsuzawa, Chairman

Copyright(c)2024 Aoyama Sogo Accounting Firm Co., Ltd. All rights reserved.

Aoyama Sogo Accounting Firm

～TheInnovation Speed Quality

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Vol.342024.6.28

A n n o u n c e m e n t

Introducing ASA REIT Partners K.K.,
a new group company.
On April 23, 2024, ASA REIT Partners K.K. was formed.
The company provides middle office (work not requiringa license) and administration services (accounting, tax
payment support).

Back in June 2023, ASA created a REIT planning group
to not only provide accounting and tax payment
services but to support an industry struggling with alabor shortage. The newly formed company is anextension of this internal department. Currently, wehave several members with prior experience in asset
management and real estate.
In 2023, about 10 private REITs were setup. With
additional entities being setup in 2024, there is concernthat available resources will further dry out. Our mission
is to share our resources with management firms, sothat asset managers can focus on their primary work ofasset management. By supporting management workthat don’t require a license, we look to create a new
industry standard, one that more effectively allocatesworkload.
ASA group will continue to work together as one toprovide our services. We sincerely appreciate yourcontinued support and business.

by Kenichi Shimizu, ASA REIT Partners K.K.

Copyright(c)2024 Aoyama Sogo Accounting Firm Co., Ltd. All rights reserved.

Aoyama Sogo Accounting Firm

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J a p a nVol.34

2024.6.28

R E I T

The path to J-REIT (My perspective)
The current market cap of J-REITs is 15 trillion yen,held by 58 stocks. Slightly down from the record of 18
trillion yen with 64 stocks (in 2021), but the J-REIT
market is still massive.
In the 1990s, I was working at a bank, where I wasassigned to the newly formed securitization division. At
the time, securitization in Japan was imitating the U.S.
securitization of receivables and loans, with theoriginator’s primary purpose to get assets and loans offbalance sheet. To localize U.S. practices in Japan, thefirm held discussions with big law firms and accounting
firms, resulting in the use of Cayman Island charitable
trusts and SPCs for securitization. Later, domestic
structures were developed that would utilize Japanese
SPCs and trusts. The same department was also activeat the time with project finance and marine vessel
finance derived from the U.S., in addition to leveraged
leasing of aircraft and structure development using SPCs.
After that, the banking world struggled with bad debt
issues which would lead to developing (dubbed “flight”schemes) securitization structures for collateralized realestate for the banks themselves, instead of advising
their own clients. Such structures used trusts and SPCs,
merging no-term real estate assets with 5-year fixed
term debt. Consequently, refinancing issues wouldemerge.
The TK-YK equity structure (YK= yugen kaisha,currently the GK = godo kaisha) would be developed as
an unprecedented way to utilize the TK partnership
under the commercial code. However, contrary to thecurrent state, no foreign equity investors were present
at that time, and most Japanese companies wereweakened by bad debt, which led to the question of
who would be the TK investors. At the time, mydepartment dealt with the challenge of securitizing realestate, and I was convinced that Japan’s economic
recovery would only happen through public REITs.
Unfortunately, the bank had no know-how of publicequity.
As time passed, the bank I was working for became
part of a joint venture. Head-hunters became active andmany of my senior colleagues left for foreign companies.
Meanwhile, I was casually observing the industry on thebrink of starting J-REITs. Just when I was burnt out with
office politics, an offer landed in my lap, “A foreign
investment company is starting a REIT in Japan. Would
you be interested?” I decided to accept the offer.
And when things were just getting started, theSeptember 11 terrorist attacks in the U.S. happened.
The stock market took a catastrophic hit and both themarket and my career took a bumpy road after that (Ileft the REIT world for a few years after that).
20 years have gone by, and it gets me emotional tothink about how the future I envisioned has become areality.

by Shigeru Hirai, Fund Services Division

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Ta x

2024.6.28

U p d a t e

Size-based Enterprise Tax Reform
Under the 2024 tax reform, companies subject to thesize-based enterprise tax will change. This is to prevent
companies from avoiding the size-based tax by reducing
or setting capital to below 100 million yen for thesubsidiary by setting up a holding company or spinoff.

※1: Transition measure for Table 1 “After Reform“②To prevent companies from last minute capital
reductions to avoid size-based tax, for fiscal years thatbegin after the effective date (“first fiscal year”),
companies that satisfy all requirements below will besubject to size-based tax. (Table 2 ⓐ, ⓑ)⚫

(Table 1)
Before reform (For fiscal years
that begin before effective date(April 1, 2025))

After reform (fiscal years that begin
after the effective date)⚫

The companies below are subject

The companies below are subject to theto the size-based tax:

size-based tax:⚫

① Companies with capital over 100 ① Companies with capital over 100
million yen at the fiscal year end

Vol.34

million yen at the fiscal year end② Companies that satisfy all conditions
below (※1)
・Capital over 100 million yen at theprior FYE

Companies subject to size-based tax in any fiscal yearthat lands between the fiscal year prior to the year of
the announcement date until the fiscal year prior to
the first fiscal year
Companies with paid-in capital less than 100 million
yen at the end of the first fiscal year
Companies with contribution amount over 1 billion
yen at the end of the first fiscal year

However, companies that satisfy all requirements below
will not be deemed to be reducing capital to avoid tax,
and thus not be subject to the size-based tax (Table 2ⓒ)・Companies with capital less than 100
million yen at this FYE・Companies with contribution amount⚫

(paid-in capital + additional paid-incapital) over 1 billion yen.
③ Companies that satisfy all conditions⚫

below (※2)
・Companies with capital less than 100
million yen at this FYE・Companies that are a subsidiary of a⚫

Companies subject to size-based tax in the year
preceding the fiscal year that includes theannouncement dateCompanies with capital under 100 million yen on theday preceding the announcement dateCompanies not subject to size-based tax for eachfiscal year that ends after the announcement datecompany with contribution amount over5 bilion yen
・Companies with contribution amountover 200 million yen

continues on next page

（Any disbursements made fromadditional paid-in capital after theannounced date (June 30, 2024) areadded back)Copyright(c)2024 Aoyama Sogo Accounting Firm Co., Ltd. All rights reserved.

Aoyama Sogo Accounting Firm

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Ta x

Vol.342024.6.28

U p d a t efrom previous page(2) Special measure
For companies that became a subsidiary through M&A
based on the special business reorganization plan during
the period from the amendment date of the Act on
Strengthening Industrial Competitiveness to March 31,2027, regardless of the above, the size-based tax will
not apply for 5 years.

※2 : For Table 1 “After Reform ③” (1) Relief measureand (2) Special measure(1) Relief measure
For companies that are newly subject to the size-based
tax under Table 1③, the increase in enterprise tax(comparative enterprise tax amount) calculated in placeof the size-based tax, is eligible for the enterprise tax
deduction.
⚫
For fiscal year that starts between April 1, 2026, toMarch 31, 20272/3 of the size-based enterprise tax amount thatexceeds the comparative enterprise tax amount.
⚫
For fiscal year that starts between April 1, 2027, toMarch 31, 2028
1/3 of the size-based enterprise tax amount thatexceeds the comparative enterprise tax amount.

Summary
With this latest reform, the size-based enterprise tax
may apply to companies with capital less than 100
million yen, so extra caution is necessary when
determining its applicability.

by Satoshi Gondaira, Certified Tax Accountant(Table 2)
Year preceding the fiscal yearthat includes announcement

Day preceding the

Fiscal year that includes theAssumptions

dateannouncement dateannouncement datefirst fiscal year

First fiscal year

FYE: March 31(FYE March 31, 2023)(March 29, 2024)(FYE March 31, 2024)(FYE March 31, 2025)(March 31, 2026)

Contribution amount: over 1 billion

Capital

yen

(yen)

Applicabe

Capital(yen)

Applicabe

Capital(yen)

Applicabe

Fiscal year preceding theCapital(yen)Applicabe

Capital(yen)

Applicabeⓐ If capital is reduced to 100
million yen and no changes are
made after announcement date

> 100Msize-based tax> 100M-100M

non-size-based tax

100M

non-size-based tax

100M

size-based tax> 100Msize-based tax> 100M-> 100M

size-based tax

100M

non-size-based tax

100M

size-based tax> 100Msize-based tax

100M

-

100M

non-size-based tax

100M

non-size-based tax

100M

non-size-based tax

100M

non-size-based tax

100M

-100M

non-size-based tax

100M

non-size-based tax

100M

non-size-based tax

and during FYE March 2024.
ⓑ If capital is reduced to 100
million yen and no changes aremade after announcement dateand during FYE March 2025.
© If capital is reduced to 100
million yen by the day preceding
the announcement date andno change in capital afterwards.
ⓓ If the company is not subject tosize-based tax for the FYE March
2023, and no change in capital
afterwards

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F r o mt h e

Vol.342024.6.28

E d i t o r

The guiding principles of ASA Group are defined as ISQ.
In our line of work, we understand the importance ofInnovation, Speed, and Quality. The key is to put theseprinciples into action. The strongest organizations areadept at applying these principles to any circumstance.
For each member who is equipped with the skills toapply these principles, the organization will be thatmuch more capable in delivering solutions.
From Sun Tzu’s Art of War, as one passage reads “theformation of the army is like water”, the key to victoryor success is to move flexibly and adapt to the situation.
In August, ASA Group marks its 25th anniversary. Ourguiding principles were declared soon after the firm’sestablishment. For the next quarter century, we look tocontinue to provide flexible solutions as your service
provider.
by Jun Murata, Editor-in-chief

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